Lower transaction fee will not deter companies from going the extra mile to retain talent.
Despite lower fee income from mergers and acquisitions (M&A) advisory business this year, investment bankers can hope for a rise in bonuses as banks try to retain talent.
While headhunters said the average compensation package, which includes a fixed component and a bonus, could swell to 35 per cent over last year’s level, the overall payout could be lower than in 2007, when fund-raising and M&A activity was at record levels.
“Bonuses as a whole are expected to be up 20-30 per cent, but certain top producers or ‘the hitters’ will receive the 2007-level pay in what remains an extremely competitive hiring market,” Options Group, a New York-based global executive search firm, said in a report last week. Bonus payments will be finalised next month.
This is striking as fewer deals have taken place in 2009. According to Bloomberg data, up to November 16, there were 275 M&A deals in India worth $50.9 billion. In the corresponding period last year, there were 557 deals worth $114.7 billion.
However, there were 65 capital market transactions worth Rs 57,300 crore till November 16 this year as against 50 deals worth Rs 22,700 crore in the corresponding period last year.
Along with public issues from private companies, a host of issues by public sector companies are expected to hit the market over the coming months.
Besides, there is expectation of hectic M&A activity in the coming months as companies have deleveraged their balance sheet and are now looking at acquisitions.
“Industry will continue to see top-level churn early next year as M&A advisory and primary market offerings are expected to pick up,” said Saket Jain, managing partner at Vito India, a specialised executive search firm for the investment banking and financial services industry.
“Senior investment banking community in India is a finite pool and banks will do everything to retain top talent, which is pushing compensation levels,” he said.
Last year, investment bankers received 30 per cent of their fixed pay as bonus. Headhunters estimate that this will touch 70 per cent this year. In 2007, some bankers had got nearly 300 per cent of the fixed component as bonuses.
A director-level employee with a global investment banker with over 10 years of experience earned Rs 1 crore fixed compensation and Rs 3 crore bonus in 2007. In 2008, he would have earned about Rs 1.3 crore. This year, he could hope to earn around Rs 1.7 crore, said industry players.
Sourabh Chattopadhyay, executive director at Options Group, said, “The payment of bonus could be top heavy with the bulk going to top producers.” Directors and managing directors are top revenue generators and some of them could touch the bonus level of 2007.
“Business heads would like to keep their teams intact as the industry builds up for good times,” he said.
But R Suresh, managing director, Stanton Chase International, a global executive search firm, cautions. “Despite excellent India performance, the global performance of a bank is going to weigh heavily on the total compensation,” he said.
“Banks are trying to protect their turf, doing everything such as offering mid-year bonuses from next year onwards to make it difficult for other firms to poach their employees,” said Manisha Deva, client partner, global finance practice for Korn Ferry International.
